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Dairy prices, which make up nearly 43 per cent of the basket, have fallen back to where they were in August 2010.

Nevertheless in New Zealand dollar terms dairy prices are still 5 per cent above their average during the 2000s and meat prices 24 per cent higher, Edwards said.

BNZ economist Doug Steel expects world prices for export commodities to ease further in the months ahead reflecting a general slowdown in world economic growth while supply is increasing and previously high prices burn off some demand.

Steel is optimistic of some stabilisation later in 2012 and improvement through 2013. "This is partly based on the current consensus view that world economic growth, on average, will be starting to improve."

But the weather is unlikely to remain as favourable as it has been and the dollar remains stubbornly high.

BNZ economists forecast a 10 per cent decline in the terms of trade - relative prices of the kinds of things New Zealand exports as against the kinds of things it imports - over the coming 18 months.

That would normally put downward pressure on the New Zealand dollar, Steel said.

"Whether that pressure turns into reality depends on many other factors, including foreign central bank actions, global risk appetite, and the domestic growth outlook relative to the rest of the world," he said.